What is a debtor in possession, and what can it do without court approval?

What debtor in possession means

A debtor in possession is a business that has filed for chapter 11 and keeps operating with control of its own assets instead of handing them to a trustee. The federal judiciary's chapter 11 overview explains that the debtor ordinarily remains in possession and control of its assets as debtor in possession and proposes a plan.

The term describes a role, not a new company. The same entity, usually with the same managers, keeps running the business, but it now acts for the bankruptcy estate under court supervision, with creditors, the US Trustee and often a creditors' committee watching what it does. In one line: routine business continues, and decisions outside routine business generally go to the court.

What can a debtor in possession do without court approval?

It can generally keep doing what the business normally does: pay employees, buy supplies, serve customers and collect receivables. The dividing line is the ordinary course of business. Under 11 U.S.C. § 363, estate property may be used, sold or leased other than in the ordinary course of business only after notice and a hearing. The section is written in terms of the trustee; in a chapter 11 case with no trustee appointed, the debtor in possession generally exercises those powers.

Does a data license need court approval?

Usually yes, but debtor's counsel decides. Whether a transaction is in the ordinary course depends on the facts of the case, and a company that has never licensed its operational records to AI developers will rarely be able to treat a first exclusive AI-training license as routine business. Most counsel will plan for a motion, notice to creditors and a hearing, which is why any introduction during a case must involve debtor's counsel from the start.

Privacy adds a second layer. If the company gave customers a privacy policy that prohibits transferring personally identifiable information to unaffiliated parties, section 363(b)(1) bars selling or leasing that information unless the deal is consistent with the policy or the court approves it after a consumer privacy ombudsman is appointed under 11 U.S.C. § 332, with notice and a hearing. Many business-record datasets can be scoped to leave customer personal information out, but counsel needs to confirm that before a motion is drafted.

Two related questions tend to arrive at the same time: whether the records count as property of the estate, and what an exclusive grant would lock up during its term, which the explainer on exclusive licenses covers.

This is general information, not legal, tax or financial advice. Confirm with debtor's counsel and the court's local rules before acting.

Debtor in possession vs trustee vs plan administrator

How to make an introduction while a company is in chapter 11

A partner's role does not change in bankruptcy: introduce, give basic fit information and step back. The sequence changes because counsel and the court sit in the middle.

1. Raise licensing with the CRO, CEO or CFO and agree that debtor's counsel will be involved before SourceX is contacted.
2. Submit the company through the referral form or your referral link, sharing only peak headcount, years of operation and the systems in use. Never send records, exports or descriptions of what the records contain.
3. SourceX qualifies the company with management and counsel, including who controls the assets and whether a trustee or committee must be consulted.
4. The company prepares its data inventory, and counsel reviews privacy policies, customer contracts and any liens on intangibles.
5. Price and terms are negotiated; counsel files whatever approval motion the case requires, and nothing binds the estate until the agreement is signed and approved.
6. Buyers review, the deal closes, the data is delivered under the agreed redaction rules, and the estate is paid.

Timing matters. Cost cutting in the 13-week cash flow often targets software subscriptions and servers, and a company whose archives were deleted has nothing left to license, so ask management to preserve exports before systems are retired.

Partners earn 25% of the eligible platform fees SourceX actually collects from the referred company's licensing deals, capped at $100,000 per referred company, and only after the buyer pays and SourceX receives its fee. Professionals retained by the estate should ask counsel whether any referral relationship must be disclosed to the court before they make an introduction.

What to say to debtor's counsel

Questions to ask counsel

• Is a license of historical records outside the ordinary course in this case, and what motion would it need?
• Do the financing order or the cash collateral order restrict asset dispositions or the use of proceeds?
• Does the privacy policy in effect at filing limit any customer information in the records?
• Do lenders hold liens on intangibles, and will they consent?
• Should the creditors' committee hear about the opportunity early?
• Does any estate-retained professional need to disclose a referral relationship?

Next step

Use the company fit checker for a preliminary, non-binding screen and check the who qualifies baseline; companies that are still operating, acquired or wound down can all qualify if the data still exists. Once counsel is on board, register as a partner and make the introduction.